Buying A Home Step 7: Inspection Negotiations
Inspection time. This is where you get a chance to see exactly what’s going on beneath the surface of your home. An inspector’s job is to point out any and all issues with the home, regardless of how minor they may be. From outlets that need to be updated to GFCI (A $5 fix) to the expected life of the roof. By the end of the inspection, you should have pages upon pages of “issues”. Since a majority of them are small, it will be important to work closely with your agent to decide on what items should be repaired prior to close, which items may warrant a price reduction or closing costs credit and what issues are severe enough to possibly need a cancellation.
During the inspection, the inspectors will examine the exterior, interior, attic, and crawl space. They look for evidence of pests, check dates on items like the furnace, heat pump and water heater, test all electrical components and appliances and do a visual inspection for any abnormalities, damages or excessive wear and tear.
Every buyer and every seller is different. Issues that concern one buyer may seem like no big deal to others. The inspector will typically help explain why an issue is being called out so that you can understand how it may impact your finances once you move into the home. The inspection is our last opportunity to negotiate the financial aspects of the home (with the exception of appraisal which only happens when the appraisal comes in too low).
Whenever possible, I always suggest that buyers attend the inspection. This is because the inspector can walk through photos and point out issues in person while explaining their thoughts on the severity. I have found that buyers who just received a copy of the inspection via email tend to panic because the number of items called out can be overwhelming. In reality, it’s possible that all of the items are cheap fixes or just simply to make you aware of future maintenance that may be needed.
Be sure to ask lots of questions and to review the inspection thoroughly. Work closely with your agent to find solutions if there are major items needing repairs. Some options include
- Asking for repairs prior to closing. This can delay closing if the lender is aware that the repairs are being requested so keep that in mind when deciding your best course of action.
- Asking for a price reduction to offset future maintenance.
- Asking for a closing costs credit from the seller so that you can keep more money in your pocket at closing time so that you can make repairs on your own.
- Escrow hold back. For major repairs that may need to be completed, one other option is to request that the seller pays for the repairs outright. Most are unwilling to do this prior to close because they either don’t have the funds available or they are concerned they will make the repairs and the deal will fall apart, forcing them to put the home back on the market. In situations like these, an agreement can be made for escrow to withhold funds from the seller’s disbursement. Once work is completed by a contractor, an invoice can be submitted to escrow for payment. Any potential remainder will be sent to either the buyer or seller based on the agreement.
In today’s strong seller’s market, it’s important to remember that all deals are different. A home that had several offers may be willing to refuse your requests if they think someone else will move forward requesting nothing. If the home has been on the market for awhile, they more are more willing to negotiate. It’s important to formulate a plan with the help of your agent who will be negotiating on your behalf.
Please feel free to check out the other steps.
Step 1: Determining Your Budget | Step 2: Hiring An Agent | Step 3: Hiring A Lender | Step 4: Viewing Homes | Step 5: Making A Strong Offer |
Step 6: Offer Acceptance | Step 7: Inspection Negotiations | Step 8: Appraisal | Step 9: Final Loan Approval | Step 10: Closing!